Cash for Clunkers FAQ or 101

Here is a FAQ on CNN Money about the Cash for Clunkers government program to get inefficient fueled vehicles off the roads. This does not sound like the most efficient use of taxpayer money but it has been approved so you might as well get some facts if your in the market for a new car purchase.

Cash for Clunkers FAQ (CNN Money):

The federal government’s new Cash for Clunkers program has caused a lot of excitement for consumers. It’s also caused plenty of confusion.

Buying a new car is a major financial commitment and you don’t want to get so carried away playing the Clunkers game that you lose sight of other big financial benefits you could stand to gain, with or without the government’s incentive.

Clunkers: Do I qualify?

Fuel economy:Your car must have an EPA-estimated combined fuel economy of 18 miles per gallon or less. The only number that counts is the one reported, as of July 24 on the EPA’s fueleconomy.gov Web site. Your own personal experience with your car’s fuel economy doesn’t count.

Age: Your car must be under 25 years old, and they mean that literally. In other words, looking at the model year alone doesn’t cut it. If you have a 1984 car, check the month it was manufactured. You can find it on a sticker inside your driver’s side door. If your car was built in June or July, you’d better hurry. If it was built before June, you’re out of luck.

Not on blocks: It would defeat the program’s environmental purpose if all people did was drag out rusting “parts cars” to trade them in. Cars that aren’t being driven don’t pollute much.

So you have to prove that car has been continuously insured for the past year, which implies you’ve been driving it. Second, you have to show that it’s been registered to you for at least a year. That shows it really was “your car” and not just something you picked up for a song just to cash in.

Cars vs. trucks

The rules differ depending on whether you’re trading in a car or a truck. In either case, the vehicle you’re buying cannot have a base price higher than $45,000.

Cars: If you’re trading in a car — as opposed to a truck or van — and it meets all the qualifications, you’re eligible to receive a credit.

If the car you’re purchasing has EPA-rated fuel economy — again, this is combined city and highway mileage — of 10 mpg better than your trade-in, you’re eligible for a $4,500 credit. If gets 4 to 9 mpg better, you’re eligible for a $3,500 credit.

You could also trade in your car to get a new truck or SUV. In this case, with only a 2 mpg improvement, you would get the $3,500 rebate. With a 5 mpg improvement you’d get $4,500.